It’s often said that the value of a good education is priceless, but in today’s money that means on average, for a university student, you’ll be looking at around £14,000 a year, including tuition fees.
When it comes to school fees, the average annual cost of an independent day-school is likely to be £16,000 for a senior school student. So, if you’re a parent or grandparent looking to build up the cash needed for school or university fees, it certainly pays to start saving as soon as you can.
Ways to save for school or university fees
An Individual Savings Account (ISA) is a simple way to save or invest. The advantage of these types of accounts is that you don’t pay tax on the interest you earn, or the increase in value of your investments, so you don’t need to declare income and capital gains from ISA savings or investments on your tax return. They are flexible too; you can save or invest a lump sum or make regular monthly contributions.
Junior ISAs are a great way to build up savings tax-efficiently for a child aged under 18. Your child can have a Junior cash ISA, a Junior stocks and shares ISA or a mixture of both, and save up to a total of £4,128 in the 2017-18 tax year. When your child reaches 18, they can access the funds, making them a good way of saving for a university education. The great advantage of a Junior ISA is that once it’s been opened by the parent or guardian, anyone can make contributions, including grandparents, friends and family. For families looking to save for school fees, parents and grandparents can also put away up to £20,000 tax-free into their own ISAs during the 2017-18 tax year.
You could also consider investing a lump sum into an investment bond. When the time comes, you can make withdrawals from the bond to pay the fees. You can also assign the bond to the child. As the beneficiary, the child would be liable to pay tax on any income and gains, however as most children don’t receive enough income or gains to exceed their annual allowances, this could be an attractive option, especially for parents who are higher or additional rate taxpayers.
Here to help
If you could do with some help and advice on saving for a child’s education, then do get it touch. We can help you put a plan in place to meet future education costs, helping you give your child the best possible start in life.